The Financing Requirement Of SMEs And The Development Of Informal Finace

Since the reform and opening-up, SMEs (small and medium enterprises), especially private SMEs have become the primary impetus behind China's economic growth. According to the related data, by the end of 2009, SMEs which went private SMEs as the mainstay registered by the business sector in China has reached 10.23 million, accounting for 99% of total number of enterprises over. SMEs account for the increase in value of 60% of GNP, taxing the 40% of revenue, and absorbing the labor force to about 75% of the whole society. Industrial output value created by SMEs in all industrial enterprises is obviously higher than that of large enterprises, the latter two showing a significant difference since 2002. The SMEs play an important role in the development of the economy. However, many SMEs, especially private SMEs facing financing difficulties in the course of its development, have always be influenced by financial repression. Unable to meet the financing needs has become an important bottleneck constraints private SMEs. At the same time, the informal finance in China's civil society is growing at a rapid rate, becoming an important means of financing for SMEs. Little attention is paid on SMEs finance and informal finance from the viewpoint of transaction cost quantitative analysis, while existing research is more explaining them from the financial repression and information asymmetry angles.Combing macro analysis and micro analysis together, we make a series of investigations among the SMEs in Quanzhou. And we prove the existence of extensive informal finance and the important impact of informal finance through the analysis of the data. Based on the survey report and the framework of transaction cost, this paper adds transaction cost into the actual cost of financing business. The quantitative financing comparison between the actual cost of SMEs' loan from the formal finance and informal finance explains the SMEs' different financing options and come to the existence of informal financial. It is precisely because of the financing needs of SMEs promotes development of informal finance. Finally, we believe that, due to the existence of informal finance has its rationality, blindly suppress not only weaken the ban on informal financial boost to the economy, but also contribute to adverse selection and moral hazard financial activities by informal finance. Therefore, the Government should give enough space to the development of the informal financial space, to ease and guide it grow in a gradual way.